Tenneco Clean Air India Q1 FY27: strong VAR growth, but margins absorb new costs

Tenneco Clean Air India started FY27 with healthy growth, led by continued market share gains and a sharp acceleration in its Advanced Ride Technologies business. For Q1 FY27, revenue from operations rose to INR 15,448 million, up 20.2 percent year on year. Value Added Revenue, the company’s preferred operating metric that excludes pass-through substrate costs, increased to INR 13,816 million, up 18.4 percent.

Profitability remained solid but showed pressure from a tougher cost environment and the structural costs of being a newly listed company. EBITDA rose to INR 2,469 million, up 7.9 percent, with an EBITDA margin of 17.9 percent on VAR. Profit after tax was INR 1,652 million, down 1.7 percent year on year, with a PAT margin of 12.0 percent on VAR. Management clarified that the prior-year quarter carried one-time benefits linked to the sale of the Motorcare business and other one-off income, and that PAT growth would have tracked EBITDA growth excluding those items.

The quarter in one line: growth outpaced the market, but costs tightened the margin band

Management positioned the quarter as a combination of market outperformance and disciplined execution. The company highlighted that Q1 FY27 VAR growth of 18.4 percent exceeded served addressable market volume growth of 16.2 percent. It also cited FY26 value market share leadership across key categories: 58 percent in commercial vehicle Clean Air Solutions, 55 percent in passenger vehicle shock absorbers and struts, and a sustained 68 percent in off-highway Clean Air Solutions.

The operating backdrop, however, was not benign. Both the presentation and the call stressed higher commodities linked to geopolitical disruptions, rupee depreciation, supply chain issues, and incremental administrative and compliance costs associated with transitioning from a private to a listed public company. Management also discussed the difference between indexed commodities such as steel, which are largely back to back with customers, versus non indexed inputs like rubber, plastics, gases and crude-linked items, where recoveries can be partial or delayed.

Financial summary (Q1 FY27)

Notes: VAR excludes pass-through substrate costs and is used by management to assess underlying performance.

Segment view: ART pulls ahead while Clean Air and Powertrain grows steadily

A key takeaway from the call was how growth is being distributed across the portfolio. The CFO disclosed segment VAR for the quarter.

Clean Air and Powertrain Solutions delivered VAR of INR 6,626 million, growing 9.6 percent year on year. Advanced Ride Technologies delivered VAR of INR 7,190 million, growing 27.9 percent year on year. In mix terms, ART contributed slightly more than half of total VAR in the quarter.

In suspension, the company continued to push its proprietary DCx Da Vinci platform. Management stated that it secured multiple new application wins across existing customers and added four new customers to the conventional and DCx platforms in Q1. It also introduced DCx32, positioned as the latest DCx variant targeting smaller A and B segment vehicles, expanding the addressable market for its advanced damping technology.

In addition, the company highlighted progress on MARD, mechanical adaptive roll damping, where it completed fitment and performance benchmarking with a leading domestic OEM. Management emphasized that this innovation was developed and validated entirely in India, reinforcing local engineering capabilities.

In Clean Air and Powertrain, the company described a broad pipeline of nominations across ignition, hot end, cold end and pipe assembly applications. A notable win was a spark plug order from one of India’s largest passenger vehicle OEMs, which management described as a strategic entry into a new whitespace. Additional wins cited included a passenger vehicle exhaust hot end program, a cold end assembly program for a global OEM CNG platform, and an upcoming aftertreatment program for a domestic commercial vehicle OEM.

Why Clean Air growth looked lower than headline industry growth

One of the sharper Q&A exchanges addressed the slower growth of Clean Air and Powertrain relative to the industry’s mid to high teens growth. The CEO explained that their served market should be adjusted for EV penetration, since EVs do not require exhaust systems, and also for the company’s non participation with a leading Japanese passenger vehicle OEM.

Management provided a directional bridge: starting from a roughly 16 percent served market growth number, subtracting an estimated 3 to 3.5 percentage points for EV, and then excluding the growth of the OEM where the company is not present, the comparable growth rate would land in the 8 to 10 percent band. On that adjusted basis, management indicated the Clean Air business performance was more apples to apples.

Importantly, management also stated it has won entry into that passenger vehicle OEM it historically did not supply, via CAFE 3 related programs, with launches expected around 2028 to 2029. This is not yet visible in financials, but it is material context for the long-term market share narrative.

Exports: still small, but strategically important

Exports were stated to be slightly over 7 percent of overall revenue in the quarter. Management characterized exports as early in its current expansion phase, noting that export focus only intensified in the last few quarters.

The CEO provided a split for export order book mix: roughly 70 percent intra-group, meaning Tenneco India exporting to other Tenneco entities, and 30 percent to third-party OEMs. He also cited two examples from the quarter’s updates: ART’s maiden order from a leading European all-terrain vehicle manufacturer, and a Powertrain heat shield order from Tenneco America.

The export opportunity is balanced by genuine uncertainty. Management referenced US Section 232 tariffs affecting certain exhaust parts exported from India and noted macro softness in Europe and the Americas. The company described exports as non linear across quarters, with variability depending on program timing.

Capacity, capex, and governance as a listed company

Capacity utilization disclosures were direct. For Clean Air and Powertrain, utilization was stated to be upward of 80 percent. For Advanced Ride Technologies, the business is operating at more than 90 percent capacity. Management linked this directly to the need for incremental capacity.

The CFO guided FY27 capex at approximately INR 350 crores to INR 450 crores, with flexibility to pull in or pull out capex based on actual demand and the economic environment. He also clarified that the capex figure includes investments toward two plants already announced totaling about INR 140 crores. Separately, management mentioned a new ART plant planned in the western part of India with an investment of around INR 70 crores.

Alongside physical expansion, the CFO emphasized the build-out of governance and compliance systems expected of a listed entity. Enhancements referenced included internal controls, risk management practices, statutory compliance systems and broader process upgrades.

Takeaways for investors

Tenneco Clean Air India’s Q1 FY27 performance was a strong growth print with a realistic view on costs. The company delivered faster-than-market VAR growth and maintained a healthy EBITDA margin, even as non indexed commodity inflation and listed-company overheads tightened margins versus the previous year.

The quarter also reinforced the portfolio shift. Advanced Ride Technologies is increasingly central to the growth story, supported by DCx Da Vinci momentum, new customer additions and the DCx32 product extension into smaller vehicles. Clean Air and Powertrain continues to build a pipeline of programs, with the spark plug order standing out as a meaningful strategic entry.

Near term, investors will likely track three variables. First, the pace of commodity recovery and the stability of margins as non indexed inputs remain volatile. Second, execution on capacity expansion while ART utilization is already high. Third, whether exports can scale from a low base amid tariffs and macro headwinds.

Management’s messaging remained balanced. It avoided numeric revenue guidance, but offered tangible operating markers such as capex range, utilization levels, export share, and a structured cadence for order book disclosure at the half-year mark.